All Australian businesses, no matter how small, will soon be lodging their pay and super details online via Single Touch Payroll.
At a glance
- Single Touch Payroll is a great opportunity for streamlining payroll and reporting processes.
- The ATO has a list of no-cost and low-cost STP providers on its website, for smaller businesses concerned about cost.
- STP solutions enable quick updating of information, can cost less than A$10 a month, and don’t require the employer to maintain the software.
By Zilla Efrat
Single Touch Payroll (STP), one of the bigger tax changes in terms of impact on taxpayers since the GST was introduced, is a great opportunity for tax practitioners to demonstrate value addition for clients.
That’s the view of Gavin Swan FCPA, a director of Absolute Accounting Services and part of an Australian Taxation Office (ATO) working group on STP.
STP started from 1 July 2018 for employers with 20 or more employees, and from 1 July 2019 for small employers with 19 or fewer employees.
A key focus is on micro employers with four or fewer employees who don’t use payroll software, and employers with closely held payees, such as family members, directors, shareholders and trustees or beneficiaries of a trust. They will need to start reporting through STP by 30 September 2019.
“Overall, STP has evolved around natural business processes,” says Swan, “but microbusinesses and those with closely held employees often don’t have the appropriate natural business processes to accommodate STP”.
“They may not have had good record-keeping or may have relied on their accountants to determine what the wages were after the end of the financial year. The ball game has now changed. Welcome to the 21st century.”
Low-cost solutions available
Swan says catching up may prove difficult for some small businesses. “For those who don’t have the natural business processes, it’s really about embedding these as part of what you do in bookkeeping and record keeping rather than as an afterthought in your annual tax return.
“There’s also the usual uncertainty about how it works or changes what you have reported. The other big issue is the cost.”
The ATO website has a list of no-cost and lowcost STP software providers, in response to the call for solutions that cost less than A$10 a month, take only minutes to complete each pay period, and do not require the employer to maintain the software.
Swan says the list is being updated: nine solutions are available, with at least another 12 to follow. The ATO says its portal may not be used for STP and that it’s not out to impose penalties for STP slip-ups, he says.
“From a practitioner’s point of view, there is nothing to fear. Closely held employers who traditionally go to their accountant six or nine months after the end of the financial year are probably up for the biggest change. There is a series of exemptions and deferrals that is going to be available, and I understand the ATO will communicate these shortly.
“Now would be an opportune time, especially coming into tax planning time, to have a look at your closely held and micro employer list from prior years and at what systems they are using, and then to get in front of them and have a discussion about STP, what software is available and how this can be integrated into their operations.”
Bringing clients into the digital age
Simon Berglund, vice president, Customers for Life at software provider Sage, notes varying levels of awareness of STP among accounting professionals, with notably lower awareness in smaller businesses that don’t have a dedicated payroll practitioner.
Diane Lucas notes “fear of the unknown” as one of the biggest issues faced by her clients. Lucas is founder and director of Direct Management, which offers bookkeeping services. She advises, “Start now! If you haven’t already put an STP plan into action, what are you waiting for? Our clients rely on us for advice, support and proactiveness – demonstrate that you are this vehicle for them.
“It is also a perfect opportunity to have the discussion with the less savvy client around bringing them into the new age – real-time reporting for STP is only a part of the conversation. What about their whole business? Surely, the business as a whole will benefit from timely processing and more accurate data capture. STP is the perfect opportunity to have the discussion with ‘shoe box’ clients around embracing some digital software.”
Early adopters benefit
David Weickhardt, general manager of products at STP software provider MYOB, says once people get started, streamlining payroll processes sparks many other benefits they hadn’t previously considered, such as streamlining the reporting process, minimising human error and eliminating payment summaries.
“It’s the worry about the process before they start that concerns businesses; they don’t realise how easy it is,” he says.
“Feedback from our partners has been that when payroll is reported at each pay run – as it is now with STP – it saves a huge amount of time at the end of the financial year.”
Swan says about 80,000 employers are already on STP, covering about 6 million employees, and between 500 to 800 employers join each day.
The December 2018 MYOB Business Monitor survey of 1000 Australian small businesses found many weren’t waiting for STP to be made compulsory.
“Thirteen per cent of businesses with 19 employees or less had started using STP, which shows people are preparing for the shift,” says Weickhardt.
Swan says STP means the ATO will receive instant reporting regarding employees’ wages, withholdings and superannuation.
“The ATO will have that information in real time and can warn people if their employers are not taking out enough tax or allowing them to claim the tax-free threshold when they are not entitled to it,” he says.
“The information, over the course of time, will also be fed into other government departments. But my understanding is that data won’t be sent to Centrelink or the Department of Human Services straight away. The ATO has to get its head around this information first.”
Swan says the next phase is pre-populating STP information into activity statements. “The ATO is working on this in consultation with stakeholders.”
STP: what you need to know
The ATO says there will be no formal registration process for STP. Agents can start reporting on behalf of clients as soon as they're ready.
Those using online or cloud-based software may be requested to supply the ATO with their unique software ID (SSID). This can be done via Access Manager using an AUSkey, or by calling 1300 85 22 32.
Agents whose clients have given them authority to finalise STP reports will not need to be separately authorised for every pay event they lodge. The ATO has streamlined the authorisation process for clients – it can be done though an annual STP engagement letter.
Employers reporting employee tax and super information in STP will no longer need to issue payment summaries to employees. They also needn’t send the ATO a payment summary annual report for information reported and finalised through STP. Further, the ATO will prefill finalised STP information into individual income tax returns and make this information available to authorised agents through prefill reports.
If an agent notices the employee year-to-date information they last reported does not reflect the information in the employer’s payroll system, they have two options: make the fix and report it in the client’s next regular pay run, or lodge an update event.
Agents should be aware that clients will need to start reporting through STP by 30 September 2019. If a client needs more time, they can request a deferral. Agents can also apply on their clients’ behalf through the Tax Agent Portal.
For further information:
Visit the ATO publication ordering service and search for "Single Touch Payroll" to find factsheets and checklists